Bridging vs Development Finance: Which Costs Less 2026 — Updated October 2026
- Bridge interest, worked example
- £60,974Bridge interest, worked example
- Development facility interest
- £58,103Development facility interest
- Development finance
- Interest on drawn funds onlyDevelopment finance
- Last updated
- October 2026Last updated
Bridging charges interest on the whole loan from day one (works funds are often retained), while development finance charges only on money drawn. For light works bridging is simpler and faster; as works grow, development finance becomes cheaper and allows larger works budgets.
What bridging vs development finance costs: worked example
- Bridge of £650,000 at 0.75% a month on the full amount
- £60,974
- Development facility (£350,000 day one plus works drawn monthly) at 9.5%
- £58,103
Purchase £500,000 plus £300,000 of works over 6 months, 12-month term.
Close on this scheme; bigger works tip it firmly towards development finance.
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- Bridging vs Development Finance Costs
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Whole of market · 130+ lenders · FCA 814533 · Same working day response
Rate context and outlook
Senior development finance currently prices from about 8.8% a year for low-leverage ground-up schemes, with most facilities at 9.5%–12%. Bank Rate is 3.75% after the 17 September hold; development lenders price off their own funding costs, so rates have stayed stable through the September swap-rate rise, and some lenders cut margins over the summer.
Lenders now expect tighter information on build costs, drawdowns and exit before committing.
Reviewed by David Doulton, Director, Doulton Bridging Finance — over 20 years in property finance. Last reviewed 1 October 2026. Doulton Money Ltd t/a Doulton Bridging Finance, FCA No. 814533.
Frequently asked questions
When is bridging better than development finance?
For light works, short timescales and when speed matters more than cost.
What counts as heavy refurbishment?
Structural work, change of use or works over about 15%–20% of the property value.
Can I switch from bridging to development finance mid-project?
Yes, by refinancing, though it adds fees.
How are funds released?
In stages as the build progresses, usually in arrears, after a monitoring surveyor confirms the work is done.
Do I need planning permission?
Senior development finance usually requires full planning; sites without it are funded with land bridging first.
How long does it take to arrange?
Usually 4–8 weeks, depending on valuation, the monitoring surveyor and legal work.
What is the difference between LTGDV and LTC?
LTGDV compares the loan with the finished value; LTC compares it with total costs. Lenders apply whichever is lower.
What if the build overruns?
Lenders expect a 5%–10% contingency. Overruns beyond it are usually funded by the developer, or by agreeing an extension.
Where this applies
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Independent whole-of-market advice · FCA No. 814533